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2016 (5) TMI 581 - ITAT MUMBAI

2016 (5) TMI 581 - ITAT MUMBAI - [2016] 47 ITR (Trib) 69 - Reopening of assessment - Reasons to believe - Held that:- Rule with regard to furnishing of reasons by the AO is to be followed strictly, as the power given to the AO for reopening of a completed assessment under the Income Tax Act, is an exceptional power and whenever Revenue seeks to exercise such power, it must strictly comply with the prerequisite conditions i.e. ‘Reasons’ must be recorded and these recorded ‘Reasons’ must be furnis .....

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as been done on some misunderstanding/misconceptions, then, the assessee is given opportunity to point out that reasons to believe, as recorded in the ‘Reasons’, do not warrant reopening, before the assessment proceedings are commenced. The AO can dispose all these objections, and if satisfied with the objections, the impugned reopening notice issued u/s 148 of the Act can be withdrawn; otherwise it can be proceeded with further. In issues, such as this, where jurisdictional issue is involved, t .....

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appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-II, Mumbai {(in short Ld. CIT(A)} dated 24.08.2009 for the assessment year 2001-02, decided against the assessment order passed by the Assessing Officer (in short AO ) u/s 143(3) r.w.s. 147 of the Act. The assessee has filed revised grounds of appeal which are reproduced hereunder: I. Re-opening is bad in law: 1. The notice u/s.148 dated 17.02.2006 is issued merely on change of opinion. 2. The co .....

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nt of transfer of trade mark çuticora as sale of business and taxing the same as capital gain. 4. The Learned CIT(A) failed to appreciate that the transfer of trade mark was before 31.03.2001 i.e. prior to the amendment in sec. 55(2) of the Act and that the said receipt is exempt from tax. 2. The arguments have been made by Dr. K. Shivaram & Miss Neelam Jadhav, Authorized Representative (in short AR ), on behalf of the assessee and Shri Vachaspati Tripathi Departmental Representative .....

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t proceedings. 3.1. During the course of hearing before us, a copy of synopsis has been filed by the Ld. Counsel, wherein, various pages of the paper book filed by the assessee and paper book filed by the department have been referred to. With the help of these paper books, it has been argued by Ld. Counsel that during the course of assessment proceedings the assessee has been making request to the AO, to provide the copy of reasons, but same was not provided to the assessee. It was further subm .....

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avit was filed by the AO on behalf of the Revenue, along with few other documents, as part of departmental paper book, wherein certain facts were deposed on oath. In response to the same, subsequently, a counter affidavit was filed by the assessee, pointing out various contradictions, fallacies and inconsistencies in the affidavit of the AO as well as other records placed on record by the department, before the Hon ble Bench. It was argued by the Ld. Counsel that after long drawn exercise and ex .....

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hat without recording the reasons prior to the issuance of notice u/s 148 and without providing a copy of the same to the assessee, the AO cannot make valid reopening of the assessment and cannot frame reassessment order. Reliance has been placed in this regard on the judgment of Hon ble Bombay High Court in the case of CIT v. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom.), Tata International Ltd. Vs. DCIT [2012] 52 SOT 465 (Mum)., Synopsys International vs. DDIT ITA no.549/Bang/2011 dt. 10. .....

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ut copy of same is available in the computer. It has been further submitted that during the course of assessment proceedings, the relevant issue was discussed with the counsel by the AO, which would be evident from this fact that the assessee has submitted reply on the merits of the issue involved, and therefore, it can be presumed that assessee was communicated the gist of the issues involved in the Reasons, on the basis of which reopening was done by the AO. It was further submitted that the R .....

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n page 29 of the paper book filed by the department which contains order sheet entries recorded by the AO. On the basis of these entries, it was argued by the Ld. Counsel that there is no mention of either recording of reasons or providing copy of the same to the assessee, or even communicating the same to the assessee, in any manner. It has been submitted that notice was issued to the assessee u/s 143(2). In response to which, the then counsel of the assessee attended before the AO and at that .....

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asons were recorded nor the same were recorded to the assessee, at any time. Therefore, reopening being contrary to law, the same should be held as invalid and impugned reassessment order should be quashed. 3.4. We have gone through the submissions made and also the material placed before us by both the sides in the form of paper books. We find that in this case, on earlier occasions, long drawn exercise has been done to thrash out the facts properly. The suitable directions have been given by t .....

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ssee. In this case, learned CIT. DR was directed by the Bench at the time of hearing fixed on 4.1.2011 to produce the reasons recorded by the A.O. for reopening the assessment by the next date of hearing fixed on 10.1.2011. Although, the learned CIT DR produced the assessment record on 10.1.2011, he could not produce any document evidencing the recording of reasons by the A.O. He, however, sought sometime to comply with the direction given by the Bench on 4.1.2011. The learned CIT, DR now submit .....

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direct the learned CIT DR to f i le an af f idavi t of the concerned A.O. stat ing al l the relevant facts l ike when reasons were recorded, why copy thereof is not placed, whether there was audi t of this case and query raised by audi t par ty, etc. He is also directed to give a copy of the said af f idavi t to the other side wel l in advance before the next date of hear ing. Accordingly, case is adjourned to 5.12.2011. Sd/- (R.S. Padvekar ) (Judicial Member ) Sd/- (P.M. Jagtap) (Accountant Mem .....

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to you which should be kept in personal custody. Further a computer file containing reasons for reopening is saved in the computer of Room no. 545 of ACIT 2(2). For protecting the same, the computer should be secured with a password." 3. That the reasons recorded by the A.O. for reopening the assessment are not available in physical form on record. 4. That a soft copy of the reasons recorded for reopening the assessment in the case of M/s. Muller & Phipps (India) Ltd. for A.Y. 2001-02 e .....

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of recording the reasons for reopening as per the printout annexed as Exhibit-A. A printout of the screen showing the properties of the computer file named 'Muller & Phipps (I) Ltd-2001-2.doc' is annexed to this affidavit as Exhibit-B. Whatever stated above is true and correct to the best of my knowledge and belief. (Mudit Srivastava) Deputy Commissioner of Income Tax-22 3.6. In response to the affidavit filed by the AO, a counter affidavit has been filed by the assessee and the cont .....

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lf serving document and hence cannot be taken on record in order to prove recording of reasons at the time of reopening of assessment. The section 148 of the Act does not recognize such recording of reasons on computer without there being a copy available on assessment record. 3. As regard para1 , no comments is required. 4. As regard "para 2", I say that the handing over note to be produced in the or iginal f or the considerat ion of the Hon'ble Bench. 5. I further say that whethe .....

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sons back door. 7. I say that para 4 records a new fact for the f irst time and should not be admi tted in evidence unless the same is proved beyond reasonable doubt. I wi l l l ike to get the computer data verif ied from computer expert to reveal the correct facts. I wi l l also l ike to cross examine the of f icer in regards to the content of his af f idavi t. 8. I further deny the content of para 5 and put the of f icer to strict proof thereof . 9. I further say that the above mentioned attac .....

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te of file creation will always come first followed by the last updated or the modified date. Thus, there seems to be apparent discrepancy showing the file creation date as 30.09.2011 while modification of the file is made on 17.2.2006. Thus it is possible that the file is created in 2011. i.e. much later than the date of recording the reasons of reopening i.e. 17.2.2006. At this juncture it may be brought to your Honours notice that the first order passed by the Hon ble Tribunal in the above ma .....

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attributes is possible by changing the computed date settings. 13. I state that the alleged copy of reasons recorded dated 17.2.2006 enclosed in their affidavit, is not signed by Mr. S.C. Sarangi the then Asst. Comm. Of Income Tax Cir. 2(2), which is mandatory requirement of the law. Further, the assessment order is passed by Mr. Uday Hardikar, ITO 2(2)(2), Mumbai. 14. I am making this affidavit to put the true facts on records and whatever is stated in paras 1 to 13 are true and correct to best .....

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matter. 2. Comments on the Affidavit in reply filed by the assessee dated 17.05.2014 during the proceedings before the Hon'ble ITAT in the above mentioned case are submitted as below: Para 1: No comments are required. Para 2: The affidavit submitted by the Id. DCIT is a statement of facts of the case. The aff idavit submits that a sof t copy of reasons recorded for reopening the assessment exists in the computer. It is submitted that as per the Information Technology Act 2000, electronic rec .....

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reopening are not available in physical form now does not mean that they were not placed in the file at any point of time. Para7: The computer file may be verified by a computer expert. The assessee may cross examine. Para 8: The same may be verif ied from a computer expert, if the Hon'ble bench so desires. Para 9: No comments are required. Para 10: There is no discrepancy. An elementary knowledge of computers is required to understand this point. The date of file creation refers to the date .....

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on. This is a common feature of the Windows Operating System and can be checked by anyone. A printout of the official help community of Microsoft Windows on this issue is attached herewith, wherein the same is explained by professionals. In case of any further doubt on this elementary feature of Windows system, the same may also be confirmed from a computer expert. Para 11: The same may be verified by a computer expert. Para 12: The same may be verified by a computer expert. Para 13: The said co .....

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sing the whole factual situation, we find that at this stage, we need not go too much deeper into the allegations and counter allegations made by both the sides. We can decide this issue on the basis of those facts only on which there is consensus of both the parties. The undisputed facts, which emerge now after aforesaid exhaustive exercise, on which there is unanimity on the part of both the sides, are that, one- no Reasons are available in the assessment record, and twothere is nothing on rec .....

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Ld. Counsel could not be displaced by the Ld. DR. 3.9 In the aforesaid given facts of the case, as have been brought out on the records, we are also not in position to reject aforesaid argument of the Ld. Counsel. We find that under these facts, the position of law is clear. It has been held by Hon ble Supreme Court in the case of GKN Driveshaft 259 ITR 19, that it is mandatory on the part of the AO to provide the copy of the reasons to the assessee and to meet the objections filed by the asses .....

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aken by Hon le Mumbai bench of ITAT in the case of Tata International Ltd. vs DCIT, supra and also in few other judgments as have been relied upon by Ld. Counsel before us. We further derive support of our view from a latest judgment of Hon ble Bombay High Court in the case of CIT vs. Trend Electronic in ITA No.1867/2013 order dated 16th September 2015. In this case, Hon ble Jurisdictional High Court, following its earlier decision in the case of Videsh Sanchar Nigam Ltd. (supra), held that law .....

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omply with the prerequisite conditions i.e. Reasons must be recorded and these recorded Reasons must be furnished to the assessee, when sought for, so as to enable the assessee to object to the same, during the course of assessment proceeding. Thus, in absence of Reasons provided by the AO to the assessee, the reassessment order shall be bad in law. The recording of Reasons and furnishing of the same has to be strictly complied with, as it is a jurisdictional issue. This requirement is very salu .....

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